Many smaller pension schemes are failing to demonstrate they provide good value for members according to new research from The Pensions Regulator.
In its annual DC survey, the watchdog found that nine out of 10 trustees on smaller schemes were not meeting all TPR guidelines, when it came to assessing value for members.
This includes trustees having good knowledge and understanding of the costs and charges paid by members, and carrying out an annual assessment of the value the scheme represents.
The TPR found that for medium sized schemes, two of out three trustees were failing to meets these standards.
However, as most people are in larger DC pensions, the TPR says that 86 per cent of members (or 6.8m people) are in schemes whose trustees are carrying out adequate checks to ensure they provide good value for members.
The TPR also published findings from its thematic review into how trustees of small and micro DC schemes are assessing value for members.
Of the 68 chair statements reviewed, the majority provided inadequate or incomplete explanations of how the scheme’s costs and charges represent good value for members.
To address the issues highlighted in the survey the TPR says it is reviewing its guidance. This will include taking a more directive approach part of its work to drive up standards of trusteeship.
The first topic area will be default investment strategies, including the considerations trustees should make about value for members.
It confirmed that it will continue to take action against schemes which produce sub-standard chair’s statements.
The DC survey found that Master trusts are the schemes most likely to have met expectations in all of the seven areas tested in the DC Survey.
The worst performing area across all schemes was investment governance with, on average, less than a quarter of scheme trustees meeting the TPR’s expectations. This was largely due to the trustees of only 14 per cent of small and 19 per cent of micro schemes meeting expectations.
The TPR’s executive director of regulator policy, analysis and advice, David Fairs, says: “Poor value for members is a key risk which needs to be managed.
“Any small schemes unwilling or unable to assess value for members should seriously consider if members would be better off being moved to a bigger scheme which benefits from economies of scale.
“It is essential that members get the benefits they deserve from their pensions. Assessing value for members enables trustees to identify and address poor performing areas, in turn making a scheme more likely to provide good outcomes for pension savers.”
“Through a number of initiatives we have worked hard to push up standards. It is disappointing to see that in small and micro schemes there is still significant progress to be made.”